BlackBerry’s deepening problems

In fact, BlackBerry Ltd., the Toronto, Canada-based, company formerly known as Research in Motion (RIM), appears to be dying, at least in the United States (U.S.). The company’s poor performance is evident in its dwindling market share from over 50% in 2009 to less than 3% at the present moment. The Z10, which is BB’s […]

In fact, BlackBerry Ltd., the Toronto, Canada-based, company formerly known as Research in Motion (RIM), appears to be dying, at least in the United States (U.S.). The company’s poor performance is evident in its dwindling market share from over 50% in 2009 to less than 3% at the present moment. The Z10, which is BB’s all-touch-screen device, and the company’s answer to iPhone 5 or Samsung S4, has failed to revitalize the company.
The company’s most recent shareholders’ meeting took place on 9 July 2013 near the company’s campus in Toronto. It was at the meeting that the name Research in Motion was officially changed to BlackBerry Ltd. The Z10 rollout in the U.S. was deemed a disaster by some shareholders, who also wondered if the launch of the keyboard-equipped Q10 would be better. BB’s CEO, Thorsten Heins, attributed the problem in the U.S. to the actions of the U.S. carriers, who he accused of “opportunistic thinking” in promoting hot-selling devices (from Apple and Samsung).
U.S. carriers and retailers are already discounting Z10 by as much as 75%. Best-Buy and Amazon are now offering Z10, which has an original price-tag of $700, for a meager $49 with a two-year contract. Although discounting is commonplace in smartphone marketing, the Z10 is being offered at a much steeper discount compared to Apple’s iPhone 5 or Samsung’s S4. Moreover, the discounting of Z10 is happening much sooner, barely 4 months from launching. On 12 July 2013, BB’s share price was at $9.24, which is quite low compared to, say, Apple’s, at over $430. Let’s take a look at a few aspects of the BB’s situation.

BlackBerry’s legacy of innovation
BlackBerry has a few remarkable innovations in its portfolio. Who can forget the signature ergonomic QWERTY keyboard design? Also, the superior security features of BB phones helped push the devices into the palms of senior corporate executives. The most significant of BB’s legacy is perhaps the introduction of wireless e-mail to the world, an innovation that is reminiscent of, but precedes, the smartphone.

BlackBerry’s goof-ups
BlackBerry has messed up in many ways that have contributed to the company’s present near-demise condition. The first sign of the company’s vulnerability came in the outage of October 2011, which resulted in a three-day shutdown of email and the Blackberry Messenger (BBM). Another slip was the company’s decision to not enter the smartphone market early, even though the company’s pioneering e-mail-enabled handsets seemed to have prepared the way for the introduction of smartphones.  
Launching the Z10 smartphone that isn’t well differentiated or much cheaper compared to the top-shelf devices (from Samsung and Apple) hasn’t been that helpful for BB either. Thus, consumers do not have enough reasons to switch. Perhaps more disturbing is the evaluation of BB’s Q10 device, which is a sequel to Z10. According to Ian Austen in the 10 July 2013 issue of New York Times, “some buyers of the Q10, a model that includes BlackBerry’s signature keyboard, have said they were disappointed to discover that it initially could not synchronize calendar and contact information with corporate systems that use Microsoft Outlook. Others discovered mail syncing issues that they had not had with previous BlackBerries. And although BlackBerry continues to expand the apps offered for the phone, many important ones are missing, and assessments of their overall quality are mixed.”  Austen alluded to an event whereby a BB shareholder was so disappointed with Q10 that he sold his BB share at a loss!

The exodus
After 20 years at the helms of affairs at BB, the two founding co-CEOs, Mike Lazaridis and Jim Balsillie, left the company last year and at least one of them has divested significantly, as the worth of this once-a-shining-star company and the envy of its high tech competitors, has taken a dramatic nose drive to almost nothing. As part of its restructuring efforts, and on top of the 5000 layoffs in Fiscal Year 2012, the company is planning to cut more jobs across the middle management in the sales and support divisions. There have already been high profile exits, including the departure of two executives in charge of key functions. One of the executives, T.A. McCain, was a vice president in charge of all social networks at BlackBerry. Marc Gingras also left the company. BlackBerry had acquired Gingras’ social calendar company Tungle.me in 2011, and Gingras was asked to customize his software for the BB’s new operating system, BlackBerry 10. BlackBerry also fired Richard Piasentin, the company’s vice president for sales in the U.S.

Smartphone demand saturation
Most people who wanted a smartphone had already acquired it by the time Z10 surfaced. Without much differentiation, switching to Z10 was limited mostly to consumers who were upgrading from previous, “non-smart” BB handsets. Demand saturation also negatively impacts Samsung and Apple products, leading, for example, to lower demands for Samsung’s S4, compared to earlier predictions.

What’s next for BlackBerry?
The outlook is still dull for BB. In the absence of an “out-of-the-box” device, I see the company bleeding to death. In February 2012, this column alluded to BB being on a tight rope. Unfortunately, I still can’t find a light at the end of the tunnel, more than 18 months on. Of course, the eventual fate of the company is open to speculation, but options include breaking up the company, strategic partnership, and being bought over.
The main idea of this article is that BlackBerry’s problems have lingered for too long and it does not seem that the company knows how to save itself from eventual death.